Previous Quarterly Editions
Expropriation Risk: 49 49 49 52 ▲Political Violence Risk:48 48 48 48 ►Terrorism Risk:40 37 35 33 ▼Exchange Transfer and Trade Sanction Risk: 25 35 44 45 ►Sovereign Default Risk:66 74 74 74 ►
TREND ►
Protest intensity in 2022 and Q1 2023* 2022 Q1 2023Cost of living : Low LowAll protest: Low Low
Cost-of-living protest risk in 2023*Wage protest: MediumFood/fuel policy protests: Medium
*Note: Protest intensity is calculated based on ACLED. Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of calculations, see the introductory essay.
Like other African countries, Senegal has felt the impact of rising global inflation, particularly in food and fuel commodities. This is causing pain for households in Dakar and other urban areas that buy significant volumes of imported goods. In 2022, inflation rose to 7.5%, unusually high for a country in the CFA franc bloc. However, consumer prices are projected to increase by only 3.1% overall in 2023.
President Macky Sall introduced a range of measures designed to protect citizens from the most painful impacts of inflation and sustain their purchasing power. Last year, public sector salaries were increased and the government spent CFA750 billion on subsidizing the prices of fuel, gas, and basic essential household supplies. The government also spent CFA157 billion on reducing its normal fiscal levies on imported rice, wheat, maize, sugar, and cooking oil. Moreover, it spent CFA43 billion on providing cash transfer support to 543,000 low-income families.
The government undertook national consultations on other measures to curb the cost of living, later introducing a further raft of measures including steps to contain rents and budgeting CFA450 billion for food and energy subsidies this year. However, the government is trying to edge away from the general subsidy approach to target much more of this help on lower-income households. Family support grants have been increased to CFA35,000 (from CFA25,000) and the qualifying vulnerability criteria have been broadened.
Moreover, the government has reinforced its support for expanding domestic agricultural output to reduce reliance on imports. Senegal has a Sahelian climate, prone to drought and high levels of food insecurity in some areas. But the country also includes highly productive regions, such as the irrigated farmlands of the Senegal river valley, the Niayes market gardening belt between Dakar and St. Louis, near the north-west coast, and, in the south, the lush farmlands and plantations of Casamance, which has a more tropical climate with higher rainfall.
The government is experimenting with various models of community farming, agricultural support hubs, and mechanisation. Over time, these initiatives should help to bolster food output. But as the population is also growing steadily, it is far from certain the agricultural and food initiatives will strengthen overall self-sufficiency and reduce reliance on imports.
TREND ▲
Senegal seeks to position itself as a service and business hub for West Africa and a natural location for higher technology or value-added activities, for example, the development of capacity to manufacture COVID vaccines, a project already underway. Despite their vocal criticism of Sall, and occasional critique of French policy, leading opposition figures such as Ousmane Sonko will probably continue this strategy.
Therefore, whatever the outcome of the 2024 election, Senegal is likely to maintain a policy stance aimed at attracting international investors whose projects will create jobs for the rapidly growing young urban population. Consequently, the risk of expropriation will remain low. The only exceptions would probably be where strategic foreign investors proved incapable of fulfilling service or development obligations they had contracted under project licences or concessions.
Political tension is already building up with the presidential election scheduled for February-March 2024. When Sall ran for President in 2012 he promised to tighten up Senegal’s rather imprecise term limit rules to prevent any head of state from serving more than two consecutive mandates. Although Sall secured referendum approval for this reform, he did not bring forward the necessary legislation.
Sall now insists he has the legal right to seek a third consecutive term of office. By April 2023, it seemed likely he would stand, having marginalized most potential successor candidates for his Alliance for the Republic party. If Sall does stand, this will be hugely controversial, particularly in urban areas – which have seen an upsurge in support for the opposition Yewwi Askan Wi bloc and its potential candidate, Sonko, the Mayor of Ziguinchor, in Casamance region in the south.
The greatest risk of political violence springs from the widespread perception among young Senegalese the authorities want to block Sonko’s candidacy. He faces two judicial cases his supporters view as politically motivated. In early 2021, a masseuse accused him of rape, prompting widespread protests in Dakar and some other urban areas which saw 21 people die. This year Sonko was charged with defamation after he accused the tourism minister of corruption. Sonko was convicted on March 30. The court imposed a minor punishment that would not prevent him standing for the presidency, but the case is being taken to appeal.
Therefore, there remains a serious possibility Sonko could be excluded from the presidential contest, either by the imposition of a heavier penalty in the defamation case or if he is convicted of rape and sentenced to serious punishment. If either of these judicial processes sees him declared ineligible to stand for the presidency next year, Senegal is likely to see widespread mass protests that would probably turn violent and could well be met with a heavy-handed security force response. Many people would probably be injured, and it is likely there could be a significant number of deaths. Public confidence in the fairness and legitimacy of Senegal’s political, electoral, and judicial institutions would be severely shaken and the country’s underlying stability would be damaged.
Even if Sonko is not barred from standing and does face Sall in a second-round election run-off, the stakes will be high. Given the strength of Sall’s support in rural areas and Sonko’s popularity in the cities, the race could be tight, and it is impossible, at this stage, to predict who would win if the election were properly conducted. Victory for Sonko would be popular in the cities, but a narrow win for Sall would likely spark a fresh wave of protest and unrest. Many young Senegalese would believe the result was rigged and would challenge the legitimacy of Sall’s continuation in office, generating an ongoing risk of destabilizing widespread popular anger and mass protest in Dakar, Ziguinchor and other cities.
Meanwhile, in Casamance, while the southern faction of local separatist rebels is now in a peace process, there is still some risk of localised violent conflict between the Senegalese army and the northern rebel faction along the border with Gambia.
TREND ▼
Jihadist terrorism remains a serious threat across West Africa: major cities and resorts that attract Western expatriates and tourists are at risk of urban terrorist attack of the kind seen in both Europe and Africa over the past decade. Senegal, with a large international community in Dakar and many European visitors, is certainly a potential target.
Moreover, the jihadist groups operating in the Sahel are trying to push outwards towards the countries of coastal West Africa; northern Benin, Togo, and Côte d’Ivoire have already suffered attacks. Eastern Senegal, which borders Mali, is certainly exposed to the risk of infiltration and so the government has reinforced military deployments, establishing an additional base for the troops guarding the border.
In 2019, the member countries of the West African Monetary and Economic Union (UEMOA by its French acronym), including Senegal announced reforms to the operation of their CFA franc single currency – which is pegged to the euro under a French state guarantee. The reform abolished the requirement for member states to deposit half their foreign exchange reserves in a French state account as a condition of the guarantee.
Despite the ending of this control, and tough economic conditions during the COVID-19 pandemic, confidence in the currency has remained strong. The IMF has been impressed with the discipline and technical competence of the UEMOA bloc’s Central Bank of West African States. Therefore, the likelihood of exchange transfer risk remains low.
There are plans to launch a single currency for the whole of West Africa, including the UEMOA states. This would almost certainly be free-floating or based on a currency basket. Exchange transfer risk might be increased. However, although political leaders are targeting a launch in 2027, many technical and institutional issues remain to be resolved and it is quite likely that the currency will not be launched then or soon after. Moreover, UEMOA governments are unlikely to agree to any framework for the new currency that does not maintain the current conservative and disciplined monetary stance as a fundamental operating principle.
Senegal, as a stable democracy with close ties to Western countries including France and the U.S., is highly unlikely to be the target of sanctions.
With the IMF projecting real GDP growth of 8.1% for this year, Senegal is among the most resilient economies in West Africa. Moreover, from 2024 or 2025 onwards, government finances may be bolstered by the flow of revenue from the Greater Tortue Ahmeyim offshore liquefied natural gas project.
The Sangomar oil field being developed by Woodside will also soon begin to generate revenues. Despite the advent of these new revenue streams, the government has pursued a conservative and disciplined fiscal strategy and the risk of sovereign default is relatively low.
Return to contents Next Chapter
